Medicare drug coverage offered by stand-alone Medicare Part D prescription drug plans (PDPs
) and Medicare Advantage plans that offer drug coverage (MAPDs
) can be categorized according to how the plan's coverage conforms to (or deviates from) the government's standard defined Medicare Part D definition
(for example, does the Medicare drug plan have a standard initial deductible, fixed 25% cost-sharing, and standard Initial Coverage Limit).
As background, each year the Centers for Medicare and Medicaid Services (CMS) releases a set of parameters for the standard defined Medicare drug plan coverage and a Medicare plan that follows this CMS model are termed defined standard (DS) drug plans. Medicare drug plans that are equivalent to the CMS defined standard Part D benefit are termed actuarially equivalent (AE) standard or basic alternative (BA). Medicare drug plans that exceed or deviate from the defined CMS standard coverage are termed enhanced alternative (EA) Medicare drug plans.
More about how to define the different plan types.
CMS adds the following summary of the different types of Medicare plans:
"These terms were intended to provide explicit guidance on
permissible benefit design parameters for [Medicare Part D prescription
drug plan] sponsors and actuaries. The first three benefit types are
considered basic prescription drug coverage, and are actuarially
equivalent to the defined standard benefit
established in statute. These basic benefit designs vary only in terms
of whether cost sharing tiers are applied versus one level of
coinsurance, the deductible is lowered or eliminated, and the initial
coverage limit is increased."
The information paraphrased below is from Chapter 5 of CMS Publication
100-18 Medicare Prescription Drug Benefit Manual which gives more
details regarding the Medicare Part D benefit types:
- Defined standard (DS) benefits
A Medicare Part D plan that has an annual deductible, has 25%
coinsurance in the initial coverage phase, receives only the 75% donut
hole discount in the coverage gap. The features of the standard defined
plan are updated and released annually by CMS: q1medicare.com/PartD-The-MedicarePartDOutlookAllYears.php
- Actuarially equivalent (AE) standard benefits
A Medicare Part D plan that has an annual deductible, the plan may
substitute certain cost-sharing requirements in defined standard
coverage including tiered structures tied to plan formularies or
preferred pharmacies in a plan's network.
- Basic alternative (BA) benefits
A Medicare Part D plan that may have a reduced or $0 deductible,
can use tiered co-payments or coinsurance, may have a modification to
the initial coverage limit. Remains actuarially equivalent to the
- Enhanced alternative (EA) coverage
A Medicare Part D plan whose value exceeds that of the defined
standard coverage. The plan design includes the basic prescription drug
coverage and has supplemental benefits which may include: a reduction
in cost-sharing in the "coverage gap" in addition to the donut discount,
a reduction in or elimination of the initial deductible, a reduction in
the coinsurance or co-payments applicable during the initial coverage
phase, an increase in the initial coverage limit, and/or supplemental
Why plan design is important: Medicare drug plan design affects Medicare Part D Extra Help benefits (or Low-Income Subsidy).
If you are qualified for the Medicare Part D Extra Help
program, the cost of your monthly Medicare Part D premiums will be
covered up to a certain level – called your state’s Low-Income Subsidy
(LIS) Benchmark Premium
. For example, if you live in a state with a benchmark premium of $25, the
Medicare Part D
Extra Help program will pay for your monthly premium up to this $25
level (or slightly above) and you will have a $0 premium when you enroll
in a "basic" Medicare Part D plan with a premium around $25 or lower.
However, if your chosen Medicare Part D plan's monthly premium has enhanced features
you can be charged the amount of the monthly premium that exceeds the
benchmark - or the portion of the premium that covered the cost of the
In our Frequently Asked Question "I am qualified for Medicaid and Medicare, so why am I still paying a monthly premium for my Part D drug plan?
", we show examples of how a person with Extra Help benefits who enrolls in a low-costing Medicare Part D plan still is charged a partial monthly premium.
In our example, when a person has chosen to enroll into a Medicare Part D prescription drug plan that offers "enhanced" features - the person may find that the Part D plan does not qualify for the $0 monthly Low-Income Subsidy (LIS) premium.
Using California as our example, the state has a 2023 benchmark premium of $38.86
, and assuming the person is qualified for full Extra Help benefits and decides to join the 2023
AARP MedicareRx Walgreens (PDP)
that has a $35.20 monthly premium, the person may expect to have a $0 premium for the plan since the premium is below the 2023 California benchmark. However,
as shown on our PDP-Finder plan details page
, the person would actually pay a monthly premium of $2.90 because the plan has "enhanced" features
and does not qualify for the $0 premium even though the $35.20 premium is
less than the $38.86 benchmark.
Question: Where can I see if a Medicare Part D plan qualifies for a $0 LIS premium?
You can see whether a Medicare Part D plan qualifies for your state’s $0 LIS
premium using our Medicare Part D Plan Finder
where all Part D plans available in each state are shown and LIS $0 premium plans are noted.
Here is an example link to the stand-alone 2023 California Medicare Part
D plans (you can choose a link to view plans in another state):
. You will notice on the PDP Finder results page that the column showing "$0 Prem LIS?
" is marked with "Yes" and a mint-green
background for qualifying plans.
As a note, when new plan designs are released, we summarize the annual number of
Medicare Part D plans into Medicare Part D benefit types and this
information is shown in PDP-Facts.com
, our online annual summary of stand-alone Part D Plan statistics (National and State):
From the graphic you can see the total number of standard Medicare Part D
plans (PDP only) vary year-to-year along with changes in the type of
Medicare Part D plans that are offered each year.
Prescription Drug Benefit Manual, Chapter 5: Benefits and Beneficiary Protections, (Rev. 14, 09-30-11)